The U.S. International Trade Commission (USITC) has announced the initiation of an investigation into the economic impact on the United States of all trade agreements. The investigation, Economic Impact of Trade Agreements Implemented Under Trade Authorities Procedures, 2021 Report, is required by section 105(f)(2) of the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 and will cover all trade agreements implemented since January 1, 1984. The USITC’s report will cover the Uruguay Round Agreements; the North American Free Trade Agreement (and its successor, the United States-Mexico-Canada Agreement (USMCA)); and U.S. free trade agreements (FTAs) with Australia, Bahrain, Canada, Chile, Colombia, the Dominican Republic and five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua), Israel, Jordan, Korea, Morocco, Oman, Panama, Peru and Singapore.

As required by the statute, the USITC, will submit its report to the U.S. House of Representatives Committee on Ways and Means and the U.S. Senate Committee on Finance by June 29, 2021. In order to prepare the report, the USITC is seeking comment from all interested parties. The USITC will also hold a public hearing in connection with the investigation on October 6, 2020. Below are key dates for this investigation:

  • September 21, 2020 – Submission of requests to appear at the hearing.
  • September 25, 2020 – Submission of prehearing briefs and statements.
  • October 6, 2020 – Public hearing.
  • October 23, 2020 – Submission of post-hearing briefs and statements.
  • November 6, 2020 – Submission of all other written comments for the record.

All written submissions, except for confidential business information, will be available for public inspection. Any confidential business information received in this investigation and used in preparing the report will not be published in a manner revealing the operations of the company supplying the information. Filings must be made through the USITC’s Electronic Document Information System (EDIS) at https://edis.usitc.gov. No in-person paper-based filings or paper copies of any electronic filings will be accepted until further notice.

The Committee on Foreign Investment in the United States (CFIUS), an inter-agency committee headed by the Department of the Treasury, has released its annual report for 2018. CFIUS is authorized to review transactions that could result in the control of U.S. businesses by foreign persons or companies, as well as non-controlling investments by foreign persons or companies in certain U.S. businesses, in order to determine the effect of such transactions on the national security of the United States. CFIUS has become more widely known in the past decade amid growing concern over foreign investment in the United States and the potential security implications of certain foreign entities owning and controlling U.S. companies and/or technology. The Defense Production Act of 1950, as amended in August 2018 by the Foreign Investment Risk Review Modernization Act (FIRRMA), requires CFIUS to provide an annual report to Congress containing various cumulative and summary information related to transaction filings.

The report notes that for 2018, CFIUS conducted a first-stage review of 229 notices of covered transactions, and that more formal second-stage investigations were undertaken with respect to 158 of those 229 notices. CFIUS concluded action on 29 of the 229 notices (approximately 13% of the notices filed) after adopting mitigation measures in order to resolve national security concerns. This equals the number of mitigation measures implemented in 2017, and continues the significant uptick in CFIUS agencies’ interest in assuring national security provisions are implemented when necessary as the 2017-2018 mitigation actions total all of those taken from 2013 to 2016.

Ultimately, the parties to 66 of the 229 transactions withdrew their notices, with 34 parties later refiling a new notice in 2019. The report notes that for 18 of the withdrawn notices, the parties either abandoned the transaction after either CFIUS informed them that it was unable to identify mitigation measures that would resolve its national security concerns or it proposed mitigation measures that the parties chose not to accept. For 2018, CFIUS referred one transaction to President Donald Trump, in which the president issued an order prohibiting the acquisition of Qualcomm Incorporated by Broadcom Limited.

The overall data provided in this annual report shows a continuing upward trend in the number of notifications filed with CFIUS from 2010 to 2018. The number of notices subject to CFIUS jurisdiction increased from 93 in 2010 to 229 in 2018; however, the filings in 2018 represent a slight decrease from the 237 notices filed in 2017. Since CFIUS notices are highly confidential, the report provides only cumulative data on various industry sectors (and based upon NAICS codes) and notes that for 2018: 35% of the filings involved manufacturing; 38% related to finance, information and services; 21% involved mining, utilities and construction; and, 7% involved entities in the wholesale trade, retail trade or transportation.

Unsurprisingly, acquisitions involving Chinese investors accounted for the largest proportion of CFIUS notices filed in 2018, accounting for 55 of the 229 notices filed. Investments from Japan (31), Canada (29), France (21) and Germany (12) rounded out the top five foreign investor countries. For the 29 notices in which mitigation measures were put in place and agreed to by the involved parties in 2018, a wide variety of specific and verifiable mitigating actions were taken. These actions range from prohibiting or limiting the transfer or sharing of certain intellectual property and ensuring that only U.S. citizens handle certain products and services, to excluding certain sensitive assets from a transaction or even requiring the divestiture of all or part of the involved U.S. business.

The pilot program implemented pursuant to FIRRMA requiring declarations for certain transactions involving critical technologies was in place only in November and December of 2018. A declaration is a short form filing, for which CFIUS is not required to make a definitive determination. Parties facing a mandatory declaration may choose to submit a full notice. During this time, the annual report notes that CFIUS conducted an assessment on 21 declarations that were filed. CFIUS cleared two transactions, requested the parties to five transaction declarations to file a full written notice, determined that it could not conclude action on 11 transaction declarations, and found that one declaration was not subject to the jurisdiction of the pilot program. The parties withdrew one declaration for business reasons. Investors will continue to watch the treatment of declarations in the coming year in order to determine whether this is a viable alternative to submitting a full notice.

In collaboration with our foreign law firm partners, we continue to update our chart of COVID-19 measures taken by governments around the world. The government measures in the chart include economic, labor and employment, health and safety, and export and import measures. Below is a list of the updated countries and a summary of the changes we are seeing.

View/Download the Country Guide: Government Measures in Response to COVID-19

This week’s update includes new information as of the last week of June 2020 for Chile, China, France, Germany, Guatemala, India, Indonesia, Israel, Italy, Japan, Mexico, Philippines, Poland, Russia, South Africa, South Korea, Spain, Thailand, Turkey, United Kingdom, United States and Vietnam. The updates are in bold on the chart for ease of reference.

In the Americas and Europe, recent changes involve the easing of stricter health and safety measures including curfews, stay-at-home orders, and domestic travel restrictions. \ In the United States some states have pulled back on easing certain restrictions. In Asia, governments continue to lift lock-down measures and implement technology-based health measures such as temperature checks and contact tracing applications. Most governments have used a phased approach to re-opening businesses previously closed in response to the pandemic. Finally, most governments continue to maintain new export controls and import facilitation measures involving COVID-19-related health and medical goods.

Please see our Trump and Trade Update of April 7 for a discussion of this initiative.

On June 29, 2020, Secretary of State Mike Pompeo announced that the United States was ending exports of U.S.-origin defense equipment to Hong Kong and “will take steps toward imposing the same restrictions on U.S. defense and dual-use technologies to Hong Kong as it does for China.” The secretary noted that the United States “can no longer distinguish between the export of controlled items to Hong Kong or to mainland China. We cannot risk these items falling into the hands of the People’s Liberation Army.” Since China’s actions in June 2019 to crack down on Hong Kong protests (see Trump and Trade Update of June 1, 2020), Pompeo stated that because “Beijing now treats Hong Kong as ‘One Country, One System,’ so must we.” While no formal notice of a regulatory change has been posted to date by the Department of State’s Directorate of Defense Trade Controls (DDTC), all interested parties must assume that as of June 30, 2020, all exports of defense/military articles under the International Traffic in Arms Regulations (ITAR) will be reviewed for export licenses under a general policy of denial.

Similarly, Secretary of Commerce Wilbur Ross has announced that with China’s imposition of new security measures on Hong Kong, “the risk that sensitive U.S. technology will be diverted to the People’s Liberation Army or Ministry of State Security has increased.” As a result, he stated that Commerce Department regulations providing preferential trade and export control treatment to Hong Kong, including the availability of export license exceptions, have been suspended. On June 30, 2020, the Department’s Bureau of Industry and Security (BIS) posted an announcement noting that effective immediately, “BIS is hereby suspending any License Exceptions for exports to Hong Kong, reexports to Hong Kong, and transfers (in-country) within Hong Kong of items subject to the Export Administration Regulations (EAR), 15 CFR Parts 730-774, that provide differential treatment than those available to the People’s Republic of China.” As a result of this action, no items subject to the EAR may be exported to Hong Kong based upon a license exception (except for transactions that would otherwise be eligible for a license exception if exported to China).

BIS has clarified that any shipments of items to Hong Kong that were on dock for loading, on lighter, laden aboard an exporting or transferring carrier, or en route aboard a carrier to a port of export or reexport on June 30, 2020, may proceed to their destination under any previous license exception eligibility. Further, deemed export/reexport transactions involving Hong Kong persons authorized due to license exception eligibility prior to June 30, 2020 may continue to be authorized under such provision until August 28, 2020, after which such transactions will require a license.

On June 25, 2020, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that its recent designations to the Specially Designated Nationals and Blocked Entities (SDN) List targeted Iran’s steel, aluminum, copper, and iron sectors. OFAC designated eight entities operating in the Iranian metals sector including companies from Iran, the United Arab Emirates (UAE), Hong Kong, and Germany. OFAC designated these entities pursuant to President Trump’s May 2019 Executive Order (E.O.) 13871, which authorizes OFAC to impose sanctions with respect to the metals sectors of Iran.

Five of the designated companies are linked to Esfahan’s Mobarakeh Steel Company (“Mobarakeh”), Iran’s largest steel manufacturer. Mobarakeh was designated in 2018 due to its link to the Islamic Revolutionary Guard Corps (IRGC), and was sanctioned by the seven member nations of the Terrorist Financing Targeting Center in October 2019 for being part of Iran’s terror support network. OFAC designated one Germany-based and three UAE-based sales agents for being owned or controlled by Mobarakeh. The other three entities designated to the SDN List are Iran metals producers. All property and interest in property of these SDNs and any entities in which they own a 50% or greater interest are blocked and may not be dealt with by U.S. persons. Foreign persons dealing with these entities may also expose themselves to U.S. sanctions.

Treasury Secretary Steven T. Mnuchin stated the following with respect to this recent action: “The Iranian regime continues to use profits from metals manufacturers and foreign sales agents to fund destabilizing behavior. The United States remains committed to isolating key sectors of the Iranian economy until the revenues from such sectors are refocused toward the welfare of the Iranian people.”

On June 25, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) announced that it would be delaying the effective date for certain filing requirements set forth in April 2020 regulations on military-related exports to China, Russia and Venezuela. After significant pushback from industry representatives that more time was needed to transition to the additional Electronic Export Information (EEI) filing requirements, BIS has delayed implementing and enforcing one aspect of the regulation until September 27, 2020. Other aspects of the April rulemaking will still become effective on June 29, 2020

In April 2020, BIS issued a final rule intended to prevent efforts by entities in China, Russia and Venezuela from acquiring U.S. technology that could be used in the development of weapons, military aircraft or surveillance technology through civilian supply chains or under civilian-use pretenses. See Trump and Trade Update of April 28, 2020. This rule expands licensing requirement controls on China, Russia and Venezuela to cover “military end users” in all three countries, in addition to “military end uses.” It also broadens the list of items controlled and potentially requiring an export license, including items such as semiconductor equipment, sensors, and other technologies sought for military end use or by military end users in these countries. The list of such items is set forth as Supplement 2 to Part 744 of the Export Administration Regulations. The rule also expands EEI filing requirements when the destination is China, Russia or Venezuela by removing two exemptions: (i) from filing EEI for any shipments valued under $2,500 and (ii) from reporting the Export Control Classification Number (ECCN) when the only reason for control is anti-terrorism (AT). This aspect of the rule essentially requires all U.S. exporters shipping to China, Russia and Venezuela to file EEI data on all exports to these countries regardless of the value. It was this aspect of the final rule that received strong opposition by industry.

As a result, BIS has announced that while the EEI filing requirement for items subject to Supplement No. 2 to Part 744 will become effective on June 29, 2020, EEI filings for exports to China, Russia or Venezuela of items controlled by ECCNs not listed in Supplement No. 2 will not be required until September 27, 2020.

On June 26, 2020, the State Department issued a Federal Register notice announcing that it has sanctioned certain Syrian individuals and entities it has determined “are responsible for or complicit in, have directly or indirectly engaged in, attempted to engage in, or financed, the obstruction, disruption, or prevention of a ceasefire in northern Syria”  or for otherwise preventing a “political solution to the conflict in Syria.”  Accordingly, the State Department has taken the following actions with regard to these persons and entities:

  • U.S. government agencies shall not procure, or enter into a contract for the procurement of, any goods or services from the individuals and entities;
  • Prohibit any United States financial institution that is a U.S. person from making loans or providing credits to the individuals and entities totaling more than $10,000,000 in any 12-month period, unless the individuals and entities are engaged in activities to relieve human suffering and the loans or credits are provided for such activities;
  • Prohibit any transactions in foreign exchange that are subject to the jurisdiction of the United States and in which the individuals and entities have any interest;
  • Prohibit any transfers of credit or payments between banking institutions or by, through, or to any banking institution, to the extent that such transfers or payments are subject to the jurisdiction of the United States and involve any interest of the individuals and entities;
  • Prohibit any United States person from investing in or purchasing significant amounts of equity or debt instruments of the individuals and entities; and
  • Restrict or prohibit imports of goods, technology, or services, directly or indirectly, into the United States from the individuals and entities.

In a parallel action, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) has placed 14 individuals and 21 entities on (and made other related revisions) the Specially Designated Nationals (SDN) List.  As a result of this action, all property and interests in property of these persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.   OFAC has indicated that any foreign financial institution that knowingly facilitates a significant financial transaction or provides significant financial services for these persons could be subject to U.S. correspondent account sanctions or payable-through account sanctions.

On June 23, 2020, the Office of the U.S. Trade Representative (USTR) released a Federal Register notice seeking public comment on whether extensions for up to 12 months should be granted for particular products that have received exclusions in the China Section 301 process from the 7.5 percent tariffs on imports from China with an annual trade value of $300 billion (List/Tranche 4).   These product exclusions were listed in five Federal Register notices and include in many instances exemptions for certain medical supplies and equipment necessary to address the COVID-19 pandemic:

  • 85 Fed Reg 13970 (March 10, 2020) – see Trump and Trade Update of March 9, 2020
  • 85 Fed Reg 15244 (March 17, 2020) – see Trump and Trade Update of March 15, 2020
  • 85 Fed Reg 17936 (March 31, 2020) – see Trump and Trade Update of March 29, 2020
  • 85 Fed Reg 28693 (May 13, 2020) – see Trump and Trade Update of May 11, 2020
  • 85 Fed Reg 35975 (June 12, 2020) – see Trump and Trade Update of June 9, 2020

At this time, the USTR is not considering product exclusion Federal Register notices issued after June 12, 2020.  All of the exclusions in the listed Federal Register notices are set to expire on September 1, 2020.

The USTR states that it will evaluate the possible extension of each exclusion on a case-by-case basis. The focus of the evaluation will be “whether, despite the first imposition of these additional duties in September 2019, the particular product remains available only from China.” These issues should be addressed in submitting any comments:

  • Whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries.
  • Any changes in the global supply chain since August 2018 as to the particular product or any other relevant industry developments.
  • The efforts, if any, the importers or U.S. purchasers have undertaken since September 2019 to source the product from the United States or third countries.

The USTR notes that it will continue to consider whether the imposition of additional duties on the products covered by the exclusion will result in severe economic harm to the commenter or other U.S. interests.

The USTR is seeking public comments from interested parties on whether to extend any particular exclusion for up to 12 months. The period for comment runs from July 1, 2020 until July 30, 2020.  Comments must be submitted on the public docket on USTR’s web portal at https://comments.USTR.gov under Docket No. USTR-2020-0027 – “Request for Comments Concerning the Extension of Particular Exclusions Granted Under the $300 Billion Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.”  New users will first have to create an account in order to submit comments.  For parties wishing to include Business Confidential Information (BCI), the USTR notes that such information will not be publicly available when comments are posted on the docket.  Parties may also upload supporting documents that can also be marked as public or BCI.

On June 24, 2020, the Office of the U.S. Trade Representative (USTR) issued a Federal Register notice concerning certain U.S. actions to enforce its rights in the ongoing World Trade Organization (WTO) dispute with the European Union (EU) over large civil aircraft. The notice seeks public comment on whether certain products of current or former EU member states should be subject to additional duties, whether certain products should be removed from the list of products currently subject to additional duties, and whether a new list of products under USTR consideration should be subject to additional duties. Public comments may be filed with the USTR until July 26, 2020.

This retaliatory trade action is the result of a longstanding and ongoing dispute between the United States and the EU over alleged subsidies provided to Airbus and Boeing. In October 2019, a WTO arbitrator ruled that the United States could implement retaliatory tariffs against the EU concerning “adverse effects” arising from EU subsidies provided to Airbus. The arbitrator determined that the United States could request authorization from the WTO’s Dispute Settlement Body (DSB) (which was subsequently granted) to take countermeasures at a level not to exceed approximately $7.5 billion annually. (See Trump and Trade Updates of October 4, 2019 and December 9, 2019). As a result, the USTR imposed a 10 percent tariff on imported EU aircraft and a 25 percent tariff on certain agricultural and industrial EU goods. In March 2020, the USTR increased the tariffs on EU aircraft to 15 percent (see Trump and Trade Update of February 17, 2020).

Under this June 2020 Federal Register notice, the USTR has announced that it is considering implementing another $3.1 billion in additional retaliatory tariffs on EU aircraft and other products given the EU’s continued non-compliance with the WTO ruling against subsidies provided to Airbus. The notice requests comments as to: (i) whether products listed in Annex I (products currently subject to duties) should be removed from the list or remain on the list, or whether the duty rate should be increased, up to a level of 100 percent; (ii) whether additional duties should be imposed on specific products listed in Annex II (products originally considered for retaliatory tariffs but not currently subject to additional duties); and, (iii) whether additional duties should be imposed on specific products listed in Annex III (a new list of products not previously considered). Any new tariffs could be as high as 100 percent.

The USTR invites interested parties to submit comments and address:

  • Whether maintaining or imposing additional duties on a specific product of one or more current or former EU member states would be appropriate to enforce U.S. WTO rights or to obtain the elimination of the EU’s WTO-inconsistent measures, and/or would likely result in the implementation of the DSB recommendations in the Large Civil Aircraft dispute or in achieving a mutually satisfactory solution.
  • Whether maintaining or imposing additional duties on specific products of one or more current or former EU member states would cause disproportionate economic harm to U.S. interests, including small or medium-size businesses and consumers.

Public comments must be filed using USTR’s electronic portal at https://comments.ustr.gov/s/. Docket No. USTR-2020-0023 – “Comments Concerning the Enforcement of U.S. WTO Rights in Large Civil Aircraft Dispute.” The docket will open on June 26, 2020 and remain open until July 26, 2020. Both public and business confidential information may be filed.

On June 22, 2020, the Office of the U.S. Trade Representative (USTR) released two Federal Register notices seeking public comment on whether extensions for up to 12 months should be granted for particular products that have received exclusions in the China Section 301 process from the 25 percent tariff on imports from China with an annual trade value of $16 billion (List/Tranche 2). The first Federal Register notice seeks public comment on product exclusions granted in September 2019 that are scheduled to expire on September 20, 2020; these exclusions cover 89 specially prepared product descriptions. The second Federal Register notice seeks public comment on product exclusions granted in October 2019 that are scheduled to expire on October 2, 2020; these exclusions cover 111 specially prepared product descriptions. For details on the specially prepared product descriptions, see Trump and Trade Update of October 3, 2019.

The USTR states that it will evaluate the possible extension of each exclusion on a case-by-case basis. The focus of the evaluation will be “whether, despite the first imposition of these additional duties in August 2018, the particular product remains available only from China.” These issues should be addressed in any comments:

  • Whether the particular product and/or a comparable product is available from sources in the United States and/or in third countries.
  • Whether there have been any changes in the global supply chain since August 2018 as to the particular product or any other relevant industry developments.
  • The efforts, if any, that importers or U.S. purchasers have undertaken since August 2018 to source the product from the United States or third countries.
  • Whether the imposition of additional duties on the products covered by the exclusion will result in severe economic harm to the commenter or other U.S. interests.

As with past extension requests, the USTR also requests certain financial data (where appropriate), including the value and quantity of the product covered by the exclusion purchased from China, from domestic sources and third-country sources in 2018 and 2019.

The USTR is seeking public comments from interested parties on whether to extend any particular exclusion for up to 12 months. The period for providing comments runs from July 1, 2020 until July 31, 2020. Comments must be submitted on the public docket on USTR’s web portal at https://comments.USTR.gov under Docket No. USTR-2020-0025 (for September 2019 product exclusions) and under Docket No. USTR-2020-0026 (for October 2019 product exclusions). New users will first have to create an account in order to submit comments. For parties wishing to include Business Confidential Information (BCI), the USTR notes that such information will not be publicly available when comments are posted on the docket. Parties may also upload supporting documents that can also be marked as public or BCI.